Amazon (NASDAQ: AMZN) shares have fallen out of favour with the market recently. Shares in the technology giant have returned just 14% since the middle of November last year, even though revenues are set to increase by more than a third in 2021.
I think I understand why the stock has performed so poorly over the past 12 months.
The loss of a CEO
Recently, I have read several articles claiming that without Jeff Bezos, Amazon will lack the entrepreneurial spirit that has helped push it forwards over the past two decades. The company’s founder stepped down as CEO at the beginning of July, 27 years after he founded the group.
As well as this change, the company has also faced increasing criticism from policymakers about working practices and competition concerns. However, I think the market is spending too much time concentrating on these negatives.
Indeed, Bezos was only the company’s CEO. The group employs over a million people worldwide, and as it has grown, managers across the business have taken over the day-to-day running of different divisions. These managers will have learnt from the founder. Even though he has left, his experiences and entrepreneurial drive will carry on through these key employees.
What’s more, Amazon is a much bigger business than it was 20 years ago. It dominates the e-commerce market in many Western markets. This gives it a substantial competitive advantage over peers.
Its investments in cloud computing technology also mean the group has the edge over its peers in this market. The company will not lose these competitive advantages just because its CEO has moved on.
That brings me to regulatory concerns. Amazon’s massive size means it attracts a lot of negative attention. It is not clear how regulators will act to curb the group’s power ,or if they will at all. As such, I am not going to spend too much time worrying about this unknown factor.
The outlook for Amazon shares
Next year will be critical for the business as it will be the first without Bezos at the helm. And I think Amazon shares could take off in 2022 as long as the business continues to achieve impressive growth. I think this will prove to the market that the company will not change under the new management.
I believe the new leadership will also provide further guidance on its future growth and investment plans, setting a course for the company to grow without its visionary founder. This should only help improve the market’s opinion of the enterprise. It should also help investors like myself assess Amazon’s potential and the stock’s valuation.
Therefore, I would buy Amazon shares for my portfolio today. I think 2022 could be a transformative year for the business, and I would like to own the shares before the rest of the market wakes up to this fact.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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